South Africa investigates possible IP theft from defense firm Denel

JOHANNESBURG (Reuters) - South Africa is investigating the alleged misappropriation of intellectual property rights belonging to state defense firm Denel, the Special Investigating Unit (SIU) confirmed on Wednesday.

FILE PHOTO: A Denel company logo is seen at the entrance of their business divisions in Pretoria, South Africa, December 4, 2018. Picture taken December 4, 2018. REUTERS/Siphiwe Sibeko

The IP relates to air-to-air missiles, stand-off weapons, surface target missiles, air defense and unmanned aerial vehicle systems, the SIU told Reuters.

“The focus area for the investigation in question is unlawful, irregular or unapproved measures or practices in relation to the misappropriation of proprietary and intellectual property rights,” SIU said.

Denel told Reuters the claims initially surfaced last year and were looked into.

“Denel did report the allegations of theft of IP to the relevant authorities who investigated the matter and found no substantiating evidence of impropriety,” the company said in a statement.

Denel employees are alleged to have inappropriately passed information to Saudi Arabian Military Industries (SAMI) during talks over a potential partnership, The City Press newspaper reported.

Saudi Arabia’s state defense company did not respond to a Reuters request for immediate comment sent on Wednesday.

South Africa’s President Cyril Ramaphosa authorized the SIU inquiry last month, according to a proclamation published in the official government gazette.

The SIU is already investigating possible corruption and mismanagement at Denel during the administration of former South African President Jacob Zuma under an existing, broader probe.

Saudi Arabia, the world’s third-largest defense spender, is seeking partnerships to develop its own defense industry. Last year it made a $1 billion bid for a partnership with Denel.

Among other things SAMI would have financed research and development of Denel Dynamics, the division of the group that produces tactical missiles and precision guided weapons.

Denel Chief Executive Danie du Toit told Reuters earlier this year that his company was open to partnerships but would not sell equity or relinquish IP rights to SAMI.

As recently as July, SAMI said it was still in commercial talks with Denel.

Denel has not released financial statements for the 2018/19 fiscal year and was projected to be insolvent in a presentation to parliament’s portfolio committee on public enterprises in September.

A pillar of South Africa’s once-mighty defense industry, like a handful of state-run companies Denel has needed government bailouts to stay afloat in recent months.

Reporting by Joe Bavier and Emma Rumney; editing by Jason Neely